Congress' stall on tax cuts angers businesses

MILWAUKEE - With about nine weeks left in the year, it is increasingly likely that the Bush tax cuts will expire without Congress taking action, business owners and tax advisers say.

MILWAUKEE — With about nine weeks left in the year, it is increasingly likely that the Bush tax cuts will expire without Congress taking action, business owners and tax advisers say.

That has people fuming, not because the tax cuts will go away, but because elected leaders failed to provide clear direction as to how companies and people ought to prepare to do business in the coming year.

“They keep talking about jobs, jobs, jobs,” Anglewicz said. “They have no empathy for what it takes to hire people and what it takes to pay for all the benefits and the taxes and what little bit is left over for the person who takes the risk.”

He’s not alone in his dissatisfaction with Washington politicians.

“People in manufacturing, the owners, are not only scared because the economy is so crappy, they’re furious with the politicians,” said Michael Retzer, executive director of the Milwaukee chapter of the National Tooling and Machining Association.

“You get the talk, but they’re not walking the walk.”

Retzer is controller at Strohwig Industries Inc. in Richfield, Wis., an engineering and tool-and-die company.

“If you think a politician is representing the best interest of the country, you’re very naive,” Retzer added. “What they’re representing is the best interest of getting re-elected.”

No one ever thought it would come to this, tax professionals say.

“The best I can tell people is, ‘Here’s what we know right now, and if this comes to pass, here’s what you should do.’ But the rules could change after it’s too late to do anything about it,” said Tim Steffen, senior vice president and financial- and estate-planning director for Robert W. Baird & Co.

In his nearly 20 years of working on tax issues, Steffen said, he’s never seen anything like the current situation in Washington.

“I’m less optimistic that something will happen between now and year end” to resolve the tax issue, Steffen added. “My personal feeling is that there’s too much disagreement as to what should happen. Heading into a lame-duck session (of Congress), there’s not going to be the agreement necessary to get anything passed.”

The 2001 and 2003 tax cuts changed tax brackets, lowering the rate for those who pay taxes. The cuts also did several other things, including lowering the estate tax — all the way to zero in 2010. The changes also doubled the deduction taxpayers can take for each of their children and reduced the tax rates on dividends and capital gains.

Nearly all of that goes away on Dec. 31.

“There’s at least something in there that impacts every single person, and that is the change in the overall tax brackets,” Steffen said. “The lowest bracket today is 10?percent. That bracket would disappear, and it would go to 15?percent. Everybody from the bottom income levels up would feel that.”

The situation has made financial planning involving taxes all but impossible.

“It’s hard to plan when you don’t know what the rules or the laws are going to be a year from now,” said Keith Rode, a CPA and tax partner for accounting firm Clifton Gunderson.

Here’s generally how major players in the debate stand on the tax issue, according to Mark Robyn, staff economist for the Tax Foundation, a nonpartisan tax-research organization based in Washington.

• President Barack Obama wants to extend the tax cuts for people making less than $200,000, or $250,000 for married couples.

• Congressional Democrats have a similar proposal.

• Congressional Republicans want to extend all of the Bush tax cuts.

If the tax cuts are allowed to expire, many think it will create conditions that will hammer small businesses.

Some businesses, particularly those set up as S corporations, would be affected. According to the IRS,

S corporations are those that elect to pass corporate income, losses, deductions and credit through to their shareholders for federal tax purposes.

“Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates,” the IRS says.

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